Cost Segregation Studies
What is a Cost Segregation Study?
An engineering-based cost segregation study is a tax planning tool that can dramatically lower income taxes. It’s based on a detailed process that identifies all the costs associated with a building’s purchase, construction, or renovation. Each cost identified is assigned its shortest possible recovery period per IRS guidelines. This allows owners to increase depreciation deductions, reduce their income tax liabilities and maximize cashflow from their real estate investment.
First, we'll determine if your property is a good fit for a cost segregation study. We prepare an initial detailed no-cost analysis to determine the benefits of doing a study.
During that analysis, we make sure you meet all the minimum qualifications for a cost segrgation study:
- You have taxable income
- You have purchased, constructed, or renovated (including tenant improvements) a commercial real estate property in the last 20 years
- Your purchase or construction costs are $250,0000 or greater
Once it is determined a study is warranted, we will begin requesting all appropriate documentation.
Common items you'll be asked to provide are:
- Construction drawings
- Purchase agreements
- Building plans
We will visit your property to determine the accuracy of the building plans and to identify the building components that qualify for a shorter recovery period. This is documented through measurements, pictures and field notes.
All information is entered into a specialized engineering software that integrates the plans of the building and calculates the measurements and counts of all building components. We download the data into our powerful proprietary software that assigns pricing and recovery periods to each component.
All studies include a thorough review and documentation of the tax law that allows taxpayers to assign a building component to a shorter recover period.
If the study is being done on a property that was constructed or purchased in a prior year, we will provide the approrpriate information to file IRS Form 3115 (Change of Accounting Method).
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The results described in this report are significant, but they're not out of the ordinary. In a typical multifamily residential cost segregation study, Veracity can reclassify 20% to 40% of the property value reclassified for accelerated depreciation.
Schedule a free consultation with Veracity's cost segregation expert to learn how your clients could benefit.
Frequently Asked Questions about Cost Segregation Studies
DOES MY TAX PREPARER ALREADY DO THIS?
WON'T MY BUILDING DEPRECIATE ANYWAY?
DOES IT MATTER IF THE REAL ESTATE IS IN A SEPARATE ENTITY FROM THE OPERATING ENTITY?
DO I NEED TO AMEND MY TAX RETURN TO USE COST SEGREGATION?
HOW MUCH DOES IT COST AND HOW MUCH WILL I SAVE?
HOW DO I GET STARTED?
You earn. Your client saves.
Ready to get started?
Book an introductory meeting with Veracity’s cost segregation expert, Chris Ostler, CPA. We’ll get you started with a no-cost analysis to determine if the property is a good fit for a full study. No commitment necessary.
We look forward to helping you serve your clients.
Have a question for Chris before booking? Reach out directly.